Kat Utecht, partner at Core VC, shares her adventurous journey of starting a VC firm on the east coast and expanding to the west coast. She describes how her startup investments improve the lives of average Americans.
Kat Utecht, partner at Core VC, shares her adventurous journey of starting a VC firm on the east coast and expanding to the west coast. She describes how her startup investments improve the lives of average Americans.
Highlights:
More details at https://podcast.sure.ventures
The Sure Shot Entrepreneur
Kat Utecht - Modernize financial infrastructure to democratize prosperity
Kat Utecht: [00:00:00] You know, I think the other thing that like Arjan and I learned is in addition to just doing direct to consumer and helping with affordability and accessibility. We really care about modernizing financial services and insurance infrastructure. We think one of the reasons it's so expensive to be poor is because the fees are so high and the fees are so high because of a lot of legacy infrastructure. So we do a lot of things that aren't direct to consumers and are pure B2B or B2B-2C and some examples like ones that you mentioned at the beginning.
Gopi Rangan: [00:00:39] You are listening to the Sure Shot Entrepreneur. The podcast for founders with ambitious ideas, venture capital investors and other early believers tell you relatable, insightful, and authentic stories to help you realize your vision.
Welcome to the Sure Shot Entrepreneur. I'm your host Gopi Rangan. Our guest today is Kat Utecht. She's a managing partner at Core Innovation Capital, an early stage venture capital fund making mercenary returns through missionary investments in financial services and insurance technology.
Some of the portfolio companies include ripple sinaps, health Sherpa, and Besto. Prior to investing with Core, Kat was at Comcast ventures and was the CEO of green rock entertainment. An e-commerce company acquired by private equity in 2009. Kat began her career in financial services, both as a middle market investment banker for Raymond James, and was a graduate of General Electric Capital's financial management program.
We will discuss how, as a mission driven venture capital investor, Kat and her partner, Arjan, look for investments to improve the lives of everyday Americans. We will learn about the firm's origins in the city of New York and how they expanded to the West Coast in the Silicon Valley and in Los Angeles. You will learn what to expect when you approach as an entrepreneur.
There are two partners at a venture capital firm and how they collaborate, how they make decisions. Kat, welcome to the Sure Shot Entrepreneur.
Kat Utecht: [00:02:20] Thanks, Gopi. Thanks for having me.
Gopi Rangan: [00:02:22] What attracted you to venture capital?
Kat Utecht: [00:02:25] I think like a decent amount of people. I fell backwards into it. You either talked to some people that have stories, pedigree paths, and always saw venture as a career. I don't even think I knew what venture capital was, until my twenties.
I happened to run this company, originally, I made angel investments and they could have made me a co-founder, because from day one, I was pretty much running the company. Even though my initial intention was just to give money and provide high level advice.
Let me tell you don't do that. That's not scalable to run all the companies that you invest in. And I won't do that again. Oh, one of the first lessons that I've learned. So I ran the company and sold it to a private equity fund. Everyone looked at my background and they're like, you have financial services, you have great startup experience. Aren't you a venture capitalist? And I looked and I said, that could be an interesting job and started talking to a lot of other people in the ecosystem, met a lot of great VCs. And I met Arjan and we really have the exact same investment philosophy, which is to do well and do good at the same time. So that's why I joined them, back in 2011.
Gopi Rangan: [00:03:40] But when you started at Core Innovation with Arjan, you had a mission in mind and the mission was to serve the everyday American. Can you tell us about the investment philosophy and how is it different from other VC firms?
Kat Utecht: [00:03:54] Yeah, definitely. And so fun fact, when Arjan and I started in 2011, when I met him, Core was actually based in New York city at 611 Broadway back in the day before we moved out West and now that it is a big presence in both in the West coast and East coast. But back then we were New Yorkers through and through and you know, the initial thesis of the fund was fintech. Then now we've evolved now really for everyday Americans. So, you know, we pretty much hear about the majority, I don't really care about the top 1% or 5%. Their money can work for them. They have a lot of other people that are working for them. So that's not our focus. So, you know, our focus, as you had said in the beginning, is mercenary in returns through missionary investments in financial services and insurance technology.
So our whole philosophy is that the more value you bring to the customer, the more they'll keep using your product and service. So we equate this high customer value to all high enterprise value of companies. And I think back in the day, especially in, in 2011, it was highly contrary that you can both make money and have a new one at the same time. More recently, you know, people have been caring about whether investing in and making sure that they're making meaningful investments. You know, I think for Arjan and I, personally, we just care and we were going to pour our heart and soul into something and into building a not just a fund, but we wanted to build a firm, a brand, and a legacy that would outlast us. the impact of what we were doing really mattered. And we just saw that there was a white space and there were a lot of people in Silicon Valley that were scared of, you know, a subprime or non-prime consumer, it was a customer that they didn't understand because they didn't really grow that way.
And then it's a, you know, FinTech in general is highly regulated. But especially when you talk about serving low and moderate income consumers, there can be a lot of controversy there. And so that was a lot that investors weren't touching, but we saw this huge opportunity that these customers were being underserved.
People were focusing a lot on solutions for the top 10% and saw all this opportunity for there to be really, really great tech solutions and spraying financial services, really to the masses and not just the masses, but the underbanked.
Gopi Rangan: [00:06:25] Your mission and Arjan’s is an inspiration to me as well. So when I started Sure Ventures, I wanted to have a similar type of mission and my mission and your mission very closely aligned. My mission is to enable the peace of mind for all individuals and businesses. I felt that the Silicon Valley in general, the type of investments and venture capital investors, don't focus on this.
Kat Utecht: [00:06:48] I think, you know, as we evolve, you know, we've seen so much opportunity, both in infrastructure plays and also direct to consumer plays. And, you know, our philosophy has gotten more popular in Silicon Valley. So in a lot of our companies, you'll see. A lot of new brand VCs that are co-investing with us for them after us. And then you'll still, you still see us somewhat more esoteric stuff that still scares people. The last several years, people got more comfortable as to where we're investing.
Gopi Rangan: [00:07:24] So when entrepreneurs come to you, what do you look for? Can you maybe use an example of an investment and show how your journey of understanding the team, understanding the product, what really impresses you, and how you make these decisions?
Kat Utecht: [00:07:39] For us like most VCs, you know, it is the team, it is the large market, it is the products. I would say that they're all mission driven like us. It could be why they selected us, but they're normally very passionate about what they're doing. So they're solving a real issue and either live it or they saw someone close that lived it and they just said, I need to fix this.
Like, this is a huge market opportunity, and a huge problem I want to fix. Even though I think, you know, some people are building things to make a lot of money and that's great but they really care about the mission behind what they're doing. And so you have a variety of experiences. You normally have that big mission.
Being an entrepreneur is one of the hardest things you can do. So having a mission that really inspires you and drives you when it can be a roller coaster ride. And when they're really low lows, I think it's super important that you're bought into what you're doing and what you're building. So we really, we have these wonderful mission driven CEOs that have built great teams.
And so when we're looking at teams, we look at, you know, can they recruit. Can they fundraise? Do we think they can scale? You know, we look at intellectual horsepower. Most of the people are really, really smart. And when you say like, do they have the grit, do they have persistence? Where have they fell before? Or what have they learned from it? Where have they been successful? What did they take from it? So we spent a lot of time with the teams and getting to know that, you know, our world, as you know, is pretty small.
So a lot of people are easy to reference. And then, lots of teams, lots on the market, even though we're focused on FinTech and insurance, as you know, there's several themes within those. So things like Neo banks and infrastructure. And lenders and savings and mortgage and elder care, um, Medicare. So there's lots of areas and categories that we've gone deep within fintech.
So we know most of the markets well, and then we'll get some new market niche really well. And again, want to go deep and understand why is this company different? What's going to be their competitive differentiation? Where's their advantage? How are they going to be able to sustain that? Makes sense? How are they going to acquire customers? And we look, and we make sure that when you look at the market, it's going to be big enough for what they're going to do and then they're going to win there. We’re looking for a market that’s over a billion dollars and that we think the company can command.
You know, and then there's a product and service, we like to look at that and certainly a reflection on the team and also how they can be competitively differentiated. So we play a lot with a lot of products. Fun fact, Arjan has taken out more loans probably than anyone else in this purposely defaulted on them, just to see people's collections practices. So we love to play with and test.
Gopi Rangan: [00:10:56] You guys are edgy.
Kat Utecht: [00:10:57] Yeah. Yeah. Luckily he can, he normally only does that when he knows they’re not reporting to the credit bureaus. Yeah. But, we like to test on every sense of the products and make sure it's something, you know, that we love, that we want to use, that we believe in.
Gopi Rangan: [00:11:13] I see many threads here. I see that the team is very important for you. That's probably the most important question that you ask, and there's a variety of different types of things that you invest in.
And the second is the domain focused on financial services or insurance, and there are many teams within that. And the third is the standard set of metrics that you look for, unit economics, market size and all of those things. And you're not shy though. Like default and try to test the product yourself and see what happens with collection agencies. That is quite the adventure.
Kat Utecht: [00:11:46] Yeah. Are you not defaulting on loans when you invest?
Gopi Rangan: [00:11:46] I have not. I have, I bought crypto, I looked at that space. Peer to peer lending came up, I opened an account just to see how that works, but I have not really ventured into that adventure space of defaulting and risking my credit history. Something that I might have to do. I learned a lot of things from you.
Kat Utecht: [00:12:12] It's really, you know, real dedication, real dedication, but just make sure they don't serve reporting to the credit bureaus, so you're okay.
Gopi Rangan: [00:12:21] I will take that lesson. It's very interesting, can you give me an example of one startup? I know we've invested in, we've looked at many startups together. We are co-investors in decent. You focus on healthcare in general. Can you pick one example and kind of walk us through, how did you get to know the entrepreneur? How many meetings did it take for you to totally warm up to the idea? Let's double click on the teams that you mentioned.
Kat Utecht: [00:12:46] Yes, definitely. So let's see, I love a lot of our portfolios. I'll take one of our favorites, which is health Sherpa of which we invested in 2016, we had met George, Cat, Nim. Back in 2015, we were actually referencing somebody else talk to George's really loved him, wanting to understand what they were doing. So Health Sherpa shepherds people into the right exchange plans. So the enrolled over 3 million people into Shane's plans, they're also doing some cool stuff with Medicare and some other areas of healthcare.
Well, pretty much you can think of them as the private healthcare.gov and actually after healthcare.gov, they enroll the most people in exchange plans. So, we really loved their mission. They really loved what they were doing for people. So a lot of their customers and moderate income on average, they're getting people into sober plans, which are pretty good healthcare plans. For $47 a month in premium, which is a great price. So they're mapping out the subsidies and really helping her people into the appropriate health insurance plan for them at a great price. So really long what they were doing, their value and cultue as a team. Loved a lot of their practices and George had come from Bridgewater. I would write these into and still writes these amazing manifestos. So you just truly appreciate what he was doing and where he was coming from. And so we just got to know them after that reference call, even though they weren't technically raising money at the time.
We just kept up the conversation for months and months and then filed, it seemed like it might be a good time for them to have raised a series. And so we led the series A back in 2016 and that at a time when everyone said we were crazy, because Trump had just been elected and people were like, how are you investing in a company that's just doing Obamacare and you're going to have Trump? Like, there's going to be no more exchanges, like what are you going to do? And, you know, the reason we have asset is one, you know, there's 20 million people without health insurance and a lot of those that are using or that are enrolling in those shade plans.
So I said, well, you don't like Trump being elected, even though Obamacare goes away, you know, they're not gonna leave 20 million people and there's going to have to be something to replace it. And this is a team that has built the best product that can evolve. They've evolved in the past. They show that they can evolve that they're really great at understanding the customer and building a great user experience.
So it was like, this is great. The more volatility in that. You know, in the health insurance market at the low end, the more that was going to be able to capitalize on that. And so, yeah, so that was, it was very concerning, especially in 2016, but so far it's been an awesome, absolutely awesome investment.
They're growing and, then George has publicly announced some of their numbers, including that they've enrolled over 3 million people, obviously with covid, they've been extremely busy in enrolling people each month. And this is, you know, been the busiest time if not the busiest time even during an open enrollment period right now. So they really have done some great things for the product and just super proud to be an investor.
Gopi Rangan: [00:16:26] Oh, this is a great story. Your bet in 2016 is proving to be an amazing investment. You and Arjan have an unusual set up where you are located in two different places. And when you meet a startup like health Sherpa, how does the process work for you? Does one partner get very excited and try to convince the other partner? Or do you both meet the entrepreneurs at the earliest stages and kind of brainstorm on this? How do you collaborate?
Kat Utecht: [00:16:52] Yeah, definitely. So yeah, Arjan and I were set up for Covid well before Covid. Like I’ve said before, we originally met in New York. And Arjan for a lot of family reasons wanted to go to LA and I was fighting California, as you can hear from my voice.
Gopi Rangan: [00:17:18] So you were in New York and Arjan was in LA. And just to make things a little more complicated, you opened an office in San Francisco.
Kat Utecht: [00:17:24] Yeah, well, originally we were in New York, New York and then went to LA and then we knew we should have a San Francisco office. A lot of our companies were there. And so what we did, I think that really helped is I spent the first 18 months with Arjan sitting literally next to him. Like we shared a desk and office and we sat next to each other for 18 months in LA and then we would travel to San Francisco together and then we traveled to New York.
We knew we were on the same page about deals, you know, and it's funny in a lot of deals, we play devil's advocate and naturally it just goes that way. So we've had a lot of really good conversations. You know, we know the questions that each of us care about and, and, you know, hopefully had had a bigger persuasive arguments that we've kind of decided, you know, for deals to get done either.
He should convince me that I want to do it, or I should be able to convince him that he doesn't want to do it. That worked out well for almost the past decade. So sitting together for that year and a half was important, then we opened up San Francisco and then our pattern was in LA. And then he comes to San Francisco every Tuesday, Wednesday, we do the deal meetings together, all as a team on Tuesdays.
And then we'd be in New York together for the, you know, at least a week. We had a really good setup and we do, we have, we have Slack, we have email. And because, you know, our partnership is really easy. It's just two people voting. We talk to each other all the time. So it's actually worked well to make decisions as far as who the deals go to.
And then there's certain things I'm super passionate about and certain things that he is so pretty much anything that's at the intersection of healthcare. My team will normally get me involved, or if it goes, is that has to do with Neil banks or real deep regulatory infrastructure, I’ll send to Arjan. If it’s in New York, I’ll take or if it’s in LA he’ll take it. Normally we've been able to split things pretty well. You know, we have completely different personalities. So if someone's a bit more cerebral, we’ll send him to Arjan, he'll be a better fit. So the team sometimes we'll see entrepreneurs and go, oh, that'll be a better fit for Kat and that'll be a better fit for Arjan.
And like we've even actually switched positions just to switch it up. They are interchangeable though, at this certain early, we do have certain preferences and the team kind of knows who to go to. One of us will take the lead and we'll have one of our vice presidents take B point with us. And the other one will probably take the devil's advocate approach and then we'll debate deals and then come to hopefully a great intellectually, honest conclusion of whether we should invest or not.
Gopi Rangan: [00:20:20] So from an entrepreneur's point of view, does an entrepreneur need to convince each of you individually? Or do they need to convince one of you and then you will do the job of convincing the other? How does it work?
Kat Utecht: [00:17:24] Yeah, that's a great question. I think, you know, as long as one of us is great, eventually you need both of us, so everyone to pitch, you need to talk to Arjan and I. But normally what we'll do is if, one of us really likes it, the other one will ask questions. So if I like a deal, Arjan will ask a lot of questions, and I’ll try to find all those answers, come back. If the team seems like they like it, we'll have the person come in and pitch the whole team.
And we have a great team in addition to Arjan and I, we have a bunch of just wonderful vice presidents, regulatory advisors, the CFO, and COO. And then they will ask questions and we’ll have someone come to the pitch at the deal meeting and eventually we’ll come to a conclusion depending on how early the company is, we can make a decision within a half hour. So if it was a hot deal, and we had to decide like that day I will just get on a phone call with an entrepreneur together. You know, we can pretty much meet the phone and make a decision if it's a small chat if it’s super early.
If it’s a larger check, up to $7 million, in a later seed or series A, you know, from our first meeting, we always want to be 20 days. So then you might go through more of a process. So it just depends on how much we're planning on investing and what stage it is, we’ll go deep into, into diligence and how much time we'll take.
Gopi Rangan: [00:22:05] So it looks like what I'm hearing is it's a flexible process. There is no one way to do it. Sometimes you make a decision in 30 minutes. Sometimes it takes a few weeks or months of getting to know the team and the decision evolves. So there is no one set formula.
Kat Utecht: [00:17:24] Yeah, so we like to have a range and we do have a whole framework for it. So I think the 30 minutes thing we'll only do is if it's a small, what we call catalyst checks, it's probably a check of like, you know, $250,000 and it's highly referenced to us and we've already shot off a couple of emails to some of our friends and we can track down who the CEO is pretty much vouch for them. And it's a market that we probably know really well. And so we feel really good about where we're investing in that space. So those will be for really quick ones.
Any one that we’ll write a significant check, we're going to be, it's going to be a little longer process. Normally when it's a bit later stage, there's actually more, I mean, it's not pretty product to the pretty market. There's a lot more for us to track down to diligence, to try and so we will. And then to your point, we did this in one year. We saw an average. We knew our CEO 17 months before we ever invested in them. And I think some of it is that, you know, we'll look at something very early and it will just be too early for us in that particular niche, even though we do early and then we'll track the CEO. We'll try and be helpful. We'll send investor updates, and I always believe entrepreneurship, you know, how investors can help on those updates and we'll try to be helpful. Then we might invest in a later seed or a series A. So we do end up knowing our CEO's for a while. So in these covid times, it’s actually been pretty helpful because we know a lot of people in the ecosystem.
So we've met them before, even if it was at a party, even if it was when they were running another business, there's a lot of the CEOs that we already know their faces. And we know we respect them even as being, which is making it a lot easier to not take in person meetings right now.
Gopi Rangan: [00:24:18] This is fascinating. We covered a lot of territory all the way from how your childhood dream was to become a car salesman.
Kat Utecht: [00:24:29] I don’t know about my childhood dream of becoming a car salesman. I was a car salesman. My dream was every Halloween I was an astronaut. I wanted to be an astronaut, but I figured that being a car dealer seemed like that was probably pretty much in the works, if I followed my family’s path. But yes, an astronaut would have been the dream though.
Gopi Rangan: [00:24:49] Looks like that dream might come true with Elon Musk launching satellites into space.
Kat Utecht: [00:24:55] Yeah, maybe.
Gopi Rangan: [00:24:59] And we covered your career through commercial finance venture capital to Comcast. And then your first office at six 11 Broadway in New York. And then how you build core ventures with a mission. And all that also very heavily focuses on financial returns and not just impact so that it's great to see that you've built the firm over the years and you've raised many funds after that. Your focus on how you make decisions with the team. You focus on the domain and the standard metrics that you use, the example that you gave with the health sherpa, gave a lot of insights on how you make these decisions collaboratively, especially with you and Arjan located in different locations.
That clearly you were well prepared for lockdown and remote work much before the rest of the world. Thanks a lot for sharing the insights on insider stories, on how you make decisions within Core. I hope to find opportunities for us to co-invest in the future and collaborate more and more.
Kat Utecht: [00:26:00] Yeah, definitely. We need to find a lot more to do together. This has been so fun. Anything I said that you have a different philosophy on how you were looking at teams and markets and products?
Gopi Rangan: [00:26:12] I align very closely with your philosophies and that's why we collaborate very often. You get to see a lot of the opportunities that I see, the area where I struggle with is remote collaboration. I struggle with investing in teams, startups, founders, located in multiple locations.
And I started to think how I would partner with someone else at my firm, if I were to bring on a second partner, especially at a different location, that's still quite adventurous to me and I haven't defaulted to risk my credit history. So that might be something that I will have to learn. Let me switch to the next section here. I want to talk to you about the activities, any leadership roles that you take and nonprofit organizations, nonprofit organization are you passionate about and why?
Kat Utecht: [00:27:00] Yeah, so role, but I'll choose, I'll choose the one that's near and dear to my heart. So I am an advisor to sky's the limit though. So sky's the limit is helping entrepreneurs or minority entrepreneurs build their businesses.
And so these are venture type businesses for the most part. They're really, just great things like starting a food truck or starting your own clothing line. And so I think outside the VC world, very few companies raise venture and honestly venture doesn’t make sense for most companies, but there's a lot of really, really great businesses that you can fill and then where you can make a lot of money without needing venture capital.
And so sky's the limit. Most of these solo entrepreneurs and being able to register their companies, they're going to raise funds. And then sometimes it's like just from the bank or from family and friends, teaching people how to do that, teaching people how to set up, you know, their income statements, their balance sheet, how to source supplies, how to hire a team, how to pay people.
So just like every nitty gritty detail of what you'd need to start a small business, a sky's the limit does that. So besides having great resource guides, they pair mentors with these mentees and the mentors are all sorts of great people from large corporations., two other VCs. So I do some office hours each month.
Two other more learned skills have entrepreneurs. These individual people become their own small businesses. And I think that's important now more than ever. I know for us, we've been very fortunate that we've had a lot of resources to figure out how to start a company. And then, we're very fortunate that we're able to invest in companies.
So I love it because it takes a lot of people that are underrepresented groups, and there are also many that are low, moderate income. A decent amount of that are in rural areas that might not have exposure to these types of businesses. It really teaches them how to be independent and build their own business.
And I think, you know, as we go through, post-covid and some jobs are gonna go away, I would love to see a lot of these entrepreneurs and small business owners, you know, spring up, you know? And so Sky's the limit, just an incredible job of preparing people to do their own business.
Gopi Rangan: [00:29:47] Oh, this is great. Thanks a lot for sharing this and I'm delighted to see that you play an active role in community development.
Kat Utecht: [00:29:53] Yeah, thank you, Gopi.
Gopi Rangan: [00:29:58] Thank you for listening to the Sure Shot Entrepreneur. I hope you enjoyed listening to real life stories about early believers, supporting ambitious entrepreneurs.
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